Calculation of Altman's Z-Score: Suppose That the Financial Ratios of a Potential

question 55

Multiple Choice

Calculation of Altman's Z-Score: Suppose that the financial ratios of a potential borrowing firm took the following values: X₁ = Net working capital/Total assets = .30, X₂ = Retained earnings/Total assets = .40, X₃ = Earnings before interest and taxes/Total assets = .43, X₄ = Market value of equity/Book value of long-term debt = .65, X₅ = Sales/Total assets ratio = 0.95. Calculate the Altman's Z-score for this firm.

• A) 3.679
• B) 2.73
• C) 10.23
• D) 2.046

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Definitions:

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